INDIRECT RATES

Most currencies are traded indirectly against the U.S. Dollar (USD), and these pairs are referred to as indirect rates. An example is the USD/JPY (Japanese Yen). The USD is the "base currency," the JPY is the "quote currency" and the rate quote is expressed as units per USD. An example of a indirect rate is as follows: USD/JPY trading at 100 means that 1 USD = 100 JPY.

CROSS RATES

Currency pairs that do not involve the USD are referred to as cross rates. Even though the USD is not represented in the quote, the USD rate is usually used in the quote calculation. An example of a cross rate is the EUR/GBP. Again, the EUR is the base currency and the GBP is the quote currency.